Iss A/s · OMXCOP:ISS
Iss A/s — Investor Day (December 2018)
28 slides from Iss A/s's investor day presentation, Dec 10, 2018
Slide 1: Strategy Update 2018
Strategy Update 2018 Investor Presentation 10 December 2018
Slide 2: Speakers
Speakers Strategy Update Jeff Gravenhorst, Group CEO Financials Pierre-Francois Riolacci, Group CFO Q&A 2
Slide 3: Forward-looking statements
Forward-looking statements This presentation contains forward-looking statements, including, but not limited to, the statements and expectations contained in the “Outlook” section of this presentation. Statements herein, other than statements of historical fact, regarding future events or prospects,
Slide 4: The ISS Way: We have built capabilities and sharpened our focus
The ISS Way: We have built capabilities and sharpened our focus …now is the time to accelerate our transition and increase growth The ISS Way 2008-13 2014-18 2019-20 Build Focus Grow Increase organic growth Building a differentiated platform Greater selectivity Accelerate transition to… …and investm
Slide 5: We are operating in a fundamentally attractive market
We are operating in a fundamentally attractive market …that presents a significant growth opportunity for Key Account focused solutions Market development Customer trends Competitive landscape • A USD 1 trillion outsourced FM market... • Large customers are increasingly moving • Traditional FM compe
Slide 6: We estimate the Key Account market, globally, to be worth approximately USD 400bn
We estimate the Key Account market, globally, to be worth approximately USD 400bn1) …and that ISS has a market share of below 2% Global outsourced facility services market Key Account market only ISS share (<2%) We estimate that the Key Account market …implying ISS has a constitutes market share bel
Slide 7: ISS's Key Account focus has proven successful
ISS’s Key Account focus has proven successful …but we have significant potential to improve our commercial success Share of Group revenue from Global Key Accounts • The Key Account opportunity is real and we can today announce 5-year Global Key Account cagr1: 12% • A new customer in the Business Ser
Slide 8: Key Account customers demand more and we must invest further
Key Account customers demand more and we must invest further …to deliver the level and consistency of service expected Key Account customers demand …deep segment expertise is …and this must be leveraged across more than just cost savings… important… sites, countries, regions Excellence Volumes Risk
Slide 9: We will accelerate our investment in Key Account customers
We will accelerate our investment in Key Account customers …to enhance our service offering and differentiate further versus our peers STRENGTHEN • 2-year accelerated Our investment • Develop our existing service and 1 investment programme funnel… platform capabilities • Fill geographic white spots
Slide 10: Our impact on working communities is becoming greater
Our impact on working communities is becoming greater …ISS cares for people, property and the environment Property Protecting and maintaining Enhancing the customer assets. engagement and Optimising the well-being of design, impact and building users. efficiency of customer work space. Facility Comb
Slide 11: The ISS Way has increased our focus and alignment
The ISS Way has increased our focus and alignment …through stricter choices of customers, services and geographies The ISS Way Customers Services Geographies Key Accounts Integrated, site-based, outcome-driven Countries where we can grow a solutions profitable Key Account business 11
Slide 12: We will now be bolder and refine our geographic footprint
We will now be bolder and refine our geographic footprint …creating a simpler and more focused business in the process We will divest 13 countries and conclude our divestment of non-core services Countries to be exited • Local market dominated by smaller, price-centric customers • We are unable to f
Slide 13: A streamlined organisation will increase our focus even further
A streamlined organisation will increase our focus even further …whilst reducing complexity and risk Change 2017 (reported) 2017 (adjusted)1 2014 ✓ c. 1,000 Key Accounts c. 125,000 c. 63,000 Customers 50% c. 200,000 c. 1,000 Key Accounts Employees c. 20% ✓ c. 490,000 c. 390,000 510,968 Countries 13
Slide 14: Medium term organic growth
Medium term organic growth “Our focused Key Account approach will deliver industry leading medium term organic growth of 4-6% - starting in 2019” 14
Slide 15: Financials
Financials Pierre-Francois Riolacci, Group CFO
Slide 16: A stronger revenue base from which to accelerate organic growth
A stronger revenue base from which to accelerate organic growth… 2017 restatements Higher quality revenue base… …with a de-risked operating profit Organic Organic Organic growth growth growth Margin1 Margin1 Margin1 2.4% 2.8% 3.1% 5.65% 5.77% 5.86% -12% -9% -8% -6% -6,334 -274 -3,351 -129 79,912 4,5
Slide 17: Supported by Key Accounts
… supported by Key Accounts Key Account characteristics Organic growth1 Revenue profile4 Working Capital Organic growth (%) Transition and mobilisation Non-Key Accounts Key Accounts • Transition and mobilisation costs on selected large 5.1 4.9 Key Accounts are capitalised and amortised over 4.2 the
Slide 18: Our Key Account focus will drive stronger and faster growing Free Cash Flow
Our Key Account focus will drive stronger and faster growing Free Cash Flow Cash Flow dynamics Operating profit Comments EBITDA Our Key Account focus will drive stronger organic growth and a slightly higher EBITDA margin Controlled reinvestment of profit to drive higher organic growth at broadly sta
Slide 19: Capital reallocation
Capital reallocation Freeing up capital to invest for higher returns Fully funded by 2019 and 2020 divestment proceeds Free Cash Flow1 4.5-5.5 DKKbn Divestment proceeds, net2 2.0-2.5 DKKbn Net Cash Flow available 6.5-8.0 DKKbn Leverage below 2.5x EBITDA3 Disciplined investments in the business Share
Slide 20: Investing in both Commercial and Operations
Investing in both Commercial and Operations Accelerated investment spend in 2019 and 2020 to drive stronger growth Focus on Key Account delivery capabilities Selected initiatives Establish Strengthen Scale • Accelerated roll-out of a new Facility Management System (FMS@ISS) which will become the bac
Slide 21: Successful allocation of capital since IPO
Successful allocation of capital since IPO Guckenheimer case study Business case Progress Acquisition multiples Organic growth EBITA-multiples 1. Improve our platform in the US ✓ 24% 1 15.9x ✓ +10% insourcing EBITA pre-synergy3 2. Enhance IFS offering to Key Accounts +14% upselling / new business 9x
Slide 22: Reporting going forward
Reporting going forward Restated figures • Restated figures will be provided in connection with the 2018 Annual Report (22 February 2019) • In accordance with IFRS any single Cash Generating Unit undergoing divestment will have to be placed as Discontinued. Business units cannot be Discontinued and
Slide 23: Margin profile going ahead
Margin profile going ahead We expect the operating margin profile to remain robust 2017 2018 2019 2020 Medium term Unchanged ‘In line with the Operating margin1 (prior to todays communication) 5.7% historical range’ (average c. 5.7%) Transformational projects2 News communicated today c. -0.3% c. -0.
Slide 24: Medium term financial targets
Medium term financial targets We expect an acceleration of The ISS Way Strategy to yield stronger financial results Organic growth Operating margin1 Free Cash Flow2 4-6% Around 5.5% (incl. restructuring) Around 3.0 DKKbn3 (from 2019 onwards) (equivalent to ‘around 5.7%’ excl. restructuring) (by 2021
Slide 25: ISS at a glance
ISS at a glance ISS will remain a leading global provider of facility services delivering industry leading organic growth Industry leadership Industry leading growth Robust margins Strong cash flow Leading and differentiated Industry leading organic Robust operating margins Strong cash flow enabling
Slide 26: Q&A
Q&A
Slide 27: Appendix
Appendix
Slide 28: Income statement – 2017 restated
Income statement – 2017 restated1 Adjusted for discontinued operations and with restructuring booked within operating expenses 2017 2017 DKK million Change reported Restated Decline reflects reclassification of revenue related to discontinued operations Revenue 79,912 73,577 (6,334) (country exits)